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Brown-Forman(BF_A) - 2025 Q1 - Quarterly Results
BF_ABrown-Forman(BF_A)2024-08-29 12:04

Financial Performance - Net sales for the first quarter of fiscal 2025 decreased 8% to 1.0billion,witha41.0 billion, with a 4% decline on an organic basis compared to the prior year[1]. - Operating income decreased 14% to 281 million, reflecting a 13% decline on an organic basis[1]. - Diluted earnings per share decreased 14% to 0.41[1].−Grossprofitdeclined130.41[1]. - Gross profit declined 13% (-8% organic) with a gross margin reduction of 330 basis points to 59.4%[9]. - Net sales decreased by 8% from 1,038 million in 2023 to 951millionin2024[19].−Grossprofitdeclinedby13951 million in 2024[19]. - Gross profit declined by 13%, from 651 million in 2023 to 565millionin2024[19].−Operatingincomefellby14565 million in 2024[19]. - Operating income fell by 14%, from 327 million in 2023 to 281millionin2024[19].−Netincomedecreasedby16281 million in 2024[19]. - Net income decreased by 16%, from 231 million in 2023 to 195millionin2024[19].−Basicanddilutedearningspersharebothdroppedby14195 million in 2024[19]. - Basic and diluted earnings per share both dropped by 14%, from 0.48 in 2023 to 0.41in2024[19].−Cashprovidedbyoperatingactivitiesdecreasedsignificantlyfrom0.41 in 2024[19]. - Cash provided by operating activities decreased significantly from 38 million in 2023 to 17millionin2024[22].−Cashandcashequivalentsattheendoftheperioddecreasedfrom17 million in 2024[22]. - Cash and cash equivalents at the end of the period decreased from 426 million in 2023 to 416millionin2024[22].−Theeffectivetaxrateslightlyimprovedfrom22.9416 million in 2024[22]. - The effective tax rate slightly improved from 22.9% in 2023 to 23.1% in 2024[19]. Sales and Market Trends - Net sales for the Tequila portfolio declined 23% (-23% organic), with el Jimador's net sales down 26% (-26% organic)[4]. - The decline in net sales was partially offset by growth from brands like Woodford Reserve and Old Forester, which continued to outperform the US Whiskey category[5]. - Total portfolio depletions decreased by 9% compared to the prior year, with net sales down 8%[26]. - Whiskey category depletions were 5 million cases, reflecting a 7% decline year-over-year, while net sales decreased by 5%[26]. - Ready-to-drink segment saw depletions of 4.9 million cases, down 9%, with net sales down 12%[26]. - Developed international markets experienced a 9% decline in net sales, while emerging markets saw a 16% decrease[28]. - The United States reported a 5% decline in net sales, with a 2% organic growth adjustment[28]. - The company reported a 1% increase in net sales for the overall portfolio, with a 2% increase in cost of sales[30]. - The top developed international markets for net sales include Germany, Australia, the United Kingdom, France, Canada, and Spain, while top emerging markets include Mexico, Poland, and Brazil[43]. Future Outlook - Organic net sales growth is expected to be in the range of 2% to 4% for fiscal 2025[13]. - Organic operating income growth is also anticipated to be in the range of 2% to 4% for fiscal 2025[13]. - The company reaffirmed its full-year fiscal 2025 guidance, including organic top and bottom line growth[2]. Capital and Investments - Capital expenditures are planned to be between 195 million and 205million[13].−ThedivestitureofFinlandiavodkaresultedinapre−taxgainof205 million[13]. - The divestiture of Finlandia vodka resulted in a pre-tax gain of 92 million, impacting overall financial performance positively[36]. - The sale of Sonoma-Cutrer wine business generated a pre-tax gain of 175million,contributingtothecompany′sfinancialresults[37].PerformanceMeasurement−Thecompanyusesnon−GAAPmeasureslike"organicchange"toassessperformanceconsistentlyacrossperiods,whichexcludestheimpactofforeignexchangefluctuations[40].−Estimatedfluctuationsindistributorinventoriesareprovidedtounderstandperformancetrends,particularlyintheU.S.market,whichoperatesunderathree−tierdistributionsystem[41].−Consumertakeawaydata,whichreflectsretailpurchases,isusedtoestimatemarketshareandconsumerdemandtrends,sourcedfromexternalpartieslikeNielsen[50].−Theestimatednetchangeindistributorinventoriesiscalculatedtoprovideinsightsintoactualconsumerdemandversusshipments,indicatingpotentialtrendsinorganicsales[51].OtherFinancialAdjustments−A175 million, contributing to the company's financial results[37]. Performance Measurement - The company uses non-GAAP measures like "organic change" to assess performance consistently across periods, which excludes the impact of foreign exchange fluctuations[40]. - Estimated fluctuations in distributor inventories are provided to understand performance trends, particularly in the U.S. market, which operates under a three-tier distribution system[41]. - Consumer takeaway data, which reflects retail purchases, is used to estimate market share and consumer demand trends, sourced from external parties like Nielsen[50]. - The estimated net change in distributor inventories is calculated to provide insights into actual consumer demand versus shipments, indicating potential trends in organic sales[51]. Other Financial Adjustments - A 13 million franchise tax refund was recognized in the first quarter of fiscal 2025 due to a change in franchise tax calculation methodology in Tennessee, retroactively applied to fiscal 2020 through fiscal 2023[38]. - The partnership with Pabst Brewing Company for the supply, sales, and distribution of Jack Daniel's Country Cocktails fully transitioned in fiscal 2024, removing non-comparable operating activity from the first quarter of fiscal 2024 and fiscal 2025[38]. - Organic net sales growth was adjusted to reflect a 2% increase, excluding acquisitions and divestitures[34]. - The "Rest of Portfolio" category now aggregates the "Wine" and "Vodka" product categories due to divestitures, with fiscal 2024 amounts adjusted for comparison[45].